a

GAO

United States General Accounting Office

Report to Congressional Committees

May 2004 MILITARY HOUSING

Opportunities Exist to 

Better Explain Family 

Housing O&M Budget 

Requests and Increase 

Visibility Over 

Reprogramming of 

Funds

GAO-04-583
www.gao.gov/cgi-bin/getrpt?GAO-04-583.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Barry W. 

Holman at (202) 512-8412 or 

holmanb@gao.gov. 

Highlights of GAO-04-583, a report to 

congressional committees 

May 2004

MILITARY HOUSING

Opportunities Exist to Better Explain 

Family Housing O&M Budget Requests 

and Increase Visibility Over 

Reprogramming of Funds 

Budget justification materials submitted to Congress for family housing 

O&M funding do not clearly and consistently explain funding requirements 

and how the housing privatization program impacts the services’ budget 

requests, frustrating congressional oversight. Various factors have 

contributed to this situation. The services use similar assumptions and 

methods to develop budget requests for family housing O&M, but they often 

rely on assumptions established up to a year and a half before the budgets 

are executed. While the services have the ability to revise and update their 

budget requests, they typically choose not to because of the difficulty of 

doing so related in part to other competing defense priorities and the 

relatively small size of the family housing O&M budget. Given these 

considerations, defense officials said that they are more likely to make the 

needed funding adjustments through reprogrammings. In addition, changes 

in the pace of expected privatization can affect funding required for the nine 

family housing O&M accounts and subaccounts—although not 

uniformly—but the effects of these changes are not well explained in budget 

justifications submissions to Congress. Although, in many cases, the services 

may have data that could result in better informed decision making, they do 

not always include such information in budget justifications. 

Congress has limited visibility of the services’ reprogramming of family 

housing O&M funds. For example, Congress is not notified when 

reprogrammings are below 10 percent of the initial funding amount or result 

in a decrease. On the other hand, DOD provides congressional decision 

makers with more information on reprogrammings for other appropriations, 

such as regular O&M. In addition, compared with the other services, the 

Navy and the Marine Corps’ reporting of reprogrammings provides even less 

visibility. For example, they did not report to Congress reprogrammings for 

the four subaccounts—management, services, furnishings, and 

miscellaneous—within the operations account. In addition, the Defense 

Finance and Accounting Service’s obligation reports for the Navy and Marine 

Corps do not separate the four operations subaccounts, as they do for the 

other services. Navy and Marine Corps officials were not aware of the 

usefulness to separate the four operations subaccounts. Also, the Navy and 

the Marine Corps obligation data reflecting reprogramming actions do not 

always match comparable official obligation data produced by the Defense 

Finance and Accounting Service. Even though the two services have been 

working with the Defense Finance and Accounting Service, officials told 

GAO that this has been a long-standing issue and difficult to resolve. 

Collectively, this lack of visibility over the reprogramming of funds and data 

inconsistencies hinder the ability of congressional and DOD decision makers 

to evaluate family housing O&M budget requests and obligations. 

The military services have owned 

and operated much housing on 

their installations but increasingly 

are privatizing housing, relying on 

the private sector to manage the 

renovation, construction, and 

maintenance of existing and new 

homes for military families. 

Funding to operate and maintain 

existing government-owned 

housing is provided through the 

family housing operation and 

maintenance (O&M) 

appropriations. The amount of 

funding required varies based on a 

number of factors, including how 

quickly privatization occurs to 

reduce requirements for 

government-owned housing. As 

requested, this report discusses the 

(1) services’ assumptions and 

methods used to develop budget 

requests and how well their budget 

justifications explain the impact of 

privatization on family housing 

O&M funds and (2) the extent to 

which Congress has visibility over 

the services’ reprogramming of 

family housing O&M funds. 

GAO is making several 

recommendations to better explain 

the budget requests for family 

housing O&M and increase 

visibility over service 

reprogramming of funds between 

the accounts and a matter for 

congressional consideration related 

to visibility of fund movements. 

In written comments on a draft of 

this report, DOD agreed with the 

recommendations. 
Page i GAO-04-583 Military Housing 

Letter 1

Results in Brief 3

Background 4

Services Do Not Clearly and Consistently Explain the Impact of 

Privatization in Their Budget Justifications to Congress 9

Congress Has Limited Visibility Over the Reprogramming of Family 

Housing O&M Funds 12

Conclusions 16

Recommendations for Executive Action 17

Matter for Congressional Consideration 17

Agency Comments 17

Scope and Methodology 18

Appendix I GAO Briefing Slides 22 

Appendix II Family Housing Operation and Maintenance Budget 

Definitions 46 

Appendix III Comments from the Department of Defense 51 

Table 

Table 1: Services’ Reprogramming Amounts and Percentages 

Reprogrammed, Fiscal Year 2003 14

Figure 

Figure 1: Percentage of Funding for the Family Housing O&M 

Appropriations by Account and Subaccount, Fiscal Year 

2004 6

Contents 
Page ii GAO-04-583 Military Housing 

Abbreviations 

DOD Department of Defense 

OSD Office of the Secretary of Defense 

O&M operation and maintenance 

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Page 1 GAO-04-583 Military Housing 

May 27, 2004 

Congressional Committees 

The military services own and operate much housing on their military 

bases while at the same time they are increasingly moving to privatize 

their housing. In doing so, they rely on the private sector to renovate and 

operate privatized housing as well as build and maintain many new 

housing units. Some funding to support both military-owned housing and 

privatization is provided for in the family housing operation and 

maintenance (O&M) portion of the military construction appropriation act. 

The services’ family housing O&M budget requests and resulting 

congressional appropriations use a budget structure consisting of nine 

accounts and subaccounts. Congress appropriated about $2.7 billion to 

operate and maintain about 230,000 housing units for servicemembers and 

their families in fiscal year 2004. The services use these funds to meet a 

range of family housing requirements, such as managing property, 

providing utilities, and maintaining and leasing housing units. 

In 1998, the Department of Defense (DOD) estimated that 60 percent of its 

family housing inventory in the United States was inadequate and in need 

of renovation or replacement. In its Defense Planning Guidance for fiscal 

years 2004 through 2009, DOD set a deadline of fiscal year 2007 to 

eliminate inadequate family housing across DOD. Recognizing this 

situation, Congress gave DOD new authorities to use private sector 

investment capital and housing construction expertise to finance, own, 

operate, and maintain military housing known as the Military Housing 

Privatization Initiative.1

 As the services privatize their housing, reductions 

in their housing inventory will occur. A portion of family housing O&M 

appropriation supports the privatization initiative, such as funding 

environmental assessments and consultant fees. 

The conference report2

 accompanying the fiscal year 2004 military 

construction appropriation bill directed us to conduct a study on the 

assumptions and methods used by the services to develop their respective 

 1

 The National Defense Authorization Act for Fiscal Year 1996 (Pub. L. No. 104-106, Feb. 10, 

1996). 

2

 H.R. Conf. Rep. No. 108-342, page 16 (2003). 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-04-583 Military Housing 

budget requests for the nine accounts and subaccounts3 that comprise the 

family housing O&M appropriations and review the reprogramming of 

funds between these accounts.4

 We recently provided your offices with 

information summarizing our preliminary findings in a briefing format (see 

app. I). This report summarizes and updates our findings contained in the 

briefing materials in the following two areas: (1) the services’ assumptions 

and methods used to develop individual budget requests and how well 

their budget justifications explain the impact of privatization on family 

housing O&M funds and (2) the extent to which Congress has visibility 

over the services’ reprogramming of family housing O&M funds. 

To address these objectives, we interviewed Army, Navy, Marine Corps, 

and Air Force family housing officials to obtain information on the 

assumptions and methods used to develop the family housing O&M budget 

requests, the impact of privatization on family housing O&M funds, and the 

reprogramming of these funds. In addition, we reviewed the services’ 

budget justification submissions to assess how well the services explained 

their assumptions, methodology, and the impact of privatization. We 

assessed the reliability of the services’ data and found some 

inconsistencies between Navy and Marine Corps data and Defense 

Finance and Accounting Service data. We believe the data gathered are 

sufficiently reliable for the purposes of this report. We also discussed the 

results of our work with officials from the Office of the Under Secretary of 

Defense (Comptroller); the Housing and Competitive Sourcing Office 

within the Office of the Under Secretary of Defense for Acquisition, 

Technology, and Logistics; the Defense Finance and Accounting Service; 

and the military services. We conducted our work from December 2003 

through March 2004 in accordance with generally accepted government 

auditing standards. Details about our scope and methodology appear at 

the end of this letter. 

 3

 The President’s budget shows four family housing O&M appropriation accounts, which 

are broken down into five program activities. However, for budget justifications and 

committee reports, both Congress and DOD break down these four appropriation accounts 

into nine accounts and subaccounts that roughly correspond to the five program activities. 

This report discusses the nine accounts and subaccounts. 

4

 The movement of funds from one appropriation account to another is a “transfer.” The 

movement of funds within the family housing O&M appropriation accounts is referred to as 

a “reprogramming.” Congress and DOD refer to these reprogrammings as fund movements 

between the nine family housing O&M accounts and subaccounts reported in budget 

justifications and committee reports. The focus of this report is on reprogrammings. 
Page 3 GAO-04-583 Military Housing 

Budget justification materials that the services submit to Congress for 

family housing O&M funding do not clearly and consistently explain the 

services’ funding requirements and how the housing privatization program 

impacts their budget requests, frustrating congressional oversight. Various 

factors have contributed to this situation. The services often rely on 

assumptions established up to a year and a half before the budgets are 

executed to develop budget requests for family housing O&M. For 

example, these budget requests are largely based on historical obligations 

adjusted for pricing and program assumptions. While the services have the 

ability to revise and update their budget requests, they typically choose 

not to because of the difficulty of doing so related in part to other 

competing defense priorities and the relatively small size of the family 

housing O&M budget. For example, if a service anticipated a slippage in 

the privatization initiative after the family housing O&M budget amounts 

are programmed, service officials told us that the budget request may not 

be revised to reflect the slippage. Defense officials said that they are more 

likely to make the needed funding adjustments through reprogrammings. 

In addition, changes in the pace of expected privatization can affect 

funding required for individual accounts and subaccounts—although not 

uniformly—-but the effects of the changed pace are not well explained in 

the services’ budget justifications. Although in many cases the services 

may have data that could better explain how the housing privatization 

program impacts their budget requests, they do not always include such 

information in budget justification submissions to Congress. 

Congress has limited visibility of the services’ reprogramming of family 

housing O&M funds. While all services reprogram family housing O&M 

funds, they are required to notify Congress of only those reprogrammings 

that are 10 percent or more of the initial funding levels for the nine 

accounts and subaccounts. Congress is not notified when reprogrammings 

are below 10 percent or result in a decrease. For example, in fiscal year 

2003, the Air Force was not required to notify Congress of a $3.7 million 

increase in the leasing account because it was below 10 percent or a $75 

million decrease in the maintenance account. Also, compared with the 

other services, the Navy and the Marine Corps’ reporting of 

reprogramming actions provides even less visibility. For example, the 

Navy and the Marine Corps did not report to Congress reprogrammings of 

10 percent or more for the four subaccounts—management, services, 

furnishings, and miscellaneous—within the operations account. 

Furthermore, the Defense Finance and Accounting Service’s obligation 

reports for the Navy and the Marine Corps do not separate the four 

operations subaccounts, as the reports do for the other services. In 

addition, unlike the Army and the Air Force, the Navy and the Marine 

Results in Brief 
Page 4 GAO-04-583 Military Housing 

Corps obligation data reflecting reprogramming actions throughout the 

year do not always match comparable official obligation data produced by 

the Defense Finance and Accounting Service. DOD provides congressional 

decision makers with more information on reprogrammings for other 

appropriations, such as regular O&M,5

 i.e., it provides a semiannual 

summary of the initial funding levels, the amount of funds reprogrammed, 

and the total funds obligated. Collectively, this lack of visibility over the 

reprogramming of funds and data inconsistencies between the Navy and 

the Marine Corps and the Defense Finance and Accounting Service hinder 

the ability of congressional and DOD decision makers to evaluate family 

housing O&M budget requests and obligations. 

To provide Congress with sufficient data in the services’ budget 

justification submissions, we are making a recommendation that the 

services better explain the data provided to Congress regarding the impact 

of privatization on family housing O&M budget requests. We are also 

making recommendations to improve congressional visibility of the Navy 

and Marine Corps’ reprogrammings of family housing O&M accounts and 

subaccounts and to improve the consistency of the Navy and Marine Corps 

obligation data. We also suggest that Congress may wish to consider 

further improving the visibility of the services’ reprogrammings by 

requiring DOD to provide information covering the net movement of funds 

for each of the nine family housing O&M accounts and subaccounts at the 

end of the fiscal year, similar to what DOD now provides to Congress on 

other appropriations. In written comments on a draft of this report, the 

Deputy Comptroller (Program/Budget) within the Office of the Under 

Secretary of Defense (Comptroller) agreed with our recommendations and 

commented favorably about our matter for congressional consideration. 

The Deputy Comptroller also stated that the department is taking steps to 

implement our recommendations. DOD’s comments are included in this 

report in appendix III. 

In fiscal year 2004, DOD owns and manages about 230,000 housing units 

for military families. At the same time, DOD is increasingly moving to 

privatize its housing, relying on the private sector to renovate and operate 

privatized housing as well as build and maintain many new housing units. 

 5

 For purposes of this report, regular O&M refers to operation and maintenance other than 

family housing operation and maintenance, normally provided in the DOD annual 

appropriations bill. 

Background 
Page 5 GAO-04-583 Military Housing 

As of February 2004, DOD had privatized about 55,100 housing units and 

expected to privatize about 160,000 housing units by the end of fiscal year 

2007, including construction of many new units. To operate and maintain 

the government-owned infrastructure, the services use family housing 

O&M funds to perform maintenance, pay utilities, provide services, 

manage the family housing program, and fund various other family 

housing requirements. Also, funding for military-owned and privatization 

support costs6

 is provided for in the family housing O&M portion of the 

annual military construction appropriation. For fiscal year 2004, Congress 

appropriated about $2.7 billion for family housing O&M in the military 

construction appropriation. The services request these funds using a 

budget structure comprised of nine accounts and subaccounts (see fig. 1).7

In turn, Congress, in its conference report accompanying the bill, uses the 

same nine accounts and subaccounts to designate its understanding of 

how the funds are to be used. As shown in figure 1, DOD groups the four 

subaccounts—management, services, furnishings, miscellaneous—under 

the operations account.8

 6

 Privatization support includes costs for consultants for advisory and assistance activities 

such as individual project development, federal civilian salaries and training activities, and 

for services such as environmental assessments and land boundary surveys. 

7

 These nine accounts and subaccounts are within each of the four appropriation accounts 

shown in the President’s budget. 

8

 See app. II for definitions of the nine accounts and subaccounts that comprise the family 

housing O&M appropriations. 
Page 6 GAO-04-583 Military Housing 

Figure 1: Percentage of Funding for the Family Housing O&M Appropriations by 

Account and Subaccount, Fiscal Year 2004 

Note: May not add to 100 percent due to rounding. 

Congressional conferees expressed several concerns about the services’ 

family housing O&M budget requests in the conference report 

accompanying the 2004 military construction appropriation bill.9

Conferees stated concerns about the services not adequately explaining 

the assumptions and methods used to develop the family housing O&M 

budget requests and about the services’ reprogramming actions. 

Furthermore, conferees reduced each of the services’ fiscal year 2004 

family housing O&M budget requests by $10 million due to the way the 

services calculated their family housing O&M requirements. Conferees 

further reduced the Navy’s request by another $7.7 million due to concerns 

 9

 Conference Report (H.R. Conf. Rep. No. 108-342, page 16 (2003)), accompanying H.R. 2559 

(became Pub. L. No. 108-132 (2003)). 
Page 7 GAO-04-583 Military Housing 

about how the Navy accounted for its housing privatization effort in its 

family housing O&M budget request for fiscal year 2004. 

As part of the President’s budget request to Congress, the services develop 

budget requests and justification submissions to fund family housing O&M 

programs and activities. The process begins with the family housing 

master plans, which provide a consolidated strategy for planning, 

programming, and executing the family housing program and include 

funding plans for maintaining government-owned housing and plans 

indicating a time frame for privatization. The services’ budget formulation 

process translates the strategy from the family housing master plans into 

their respective budget requests. In that process, assumptions about the 

future requirements for family housing, including assumptions related to 

housing privatization, are established and refined. The budget requests are 

based largely on historical obligations adjusted for pricing and program 

assumptions. The Office of the Secretary of Defense (OSD) provides 

inputs on key pricing assumptions such as inflation, foreign currency 

rates, and pay adjustments. OSD and the services determine program 

assumptions including expected reductions in inventory due to housing 

privatization. For example, when the services are developing the budget 

request for the utilities account, they typically look at prior year costs per 

unit and adjust the costs for anticipated inflation and expected changes in 

housing unit inventory. 

The family housing O&M budget requests are developed through a series 

of scheduled steps as part of DOD’s Planning, Programming, and 

Budgeting System. The planning stage begins about one year before the 

budget request is sent to Congress, as the family housing O&M 

requirements are defined based on the family housing master plans (see 

app. I, slides 10 and 11). Around the same time, OSD issues its Defense 

Planning Guidance, which may provide broad planning assumptions for 

the services. For example, DOD’s requirement to eliminate inadequate 

housing by 2007 is derived from the Defense Planning Guidance. In the 

programming phase, the services develop their Program Objectives 

Memorandums, which are 6-year plans that define service requirements. 

Program Objectives Memorandum budget targets, including family housing 

O&M budget targets, are then matched against the services’ available 

resources. The programming phase concludes with decisions that are 

documented in OSD’s Program Decision Memorandums issued about 3 to 

4 months before the President submits the budget to Congress. At the 

same time, the services are developing the family housing O&M budget 

request. This request is included in the budget submission the services 

Family Housing O&M 

Budget Process 
Page 8 GAO-04-583 Military Housing 

send to OSD for consideration. As the budgeting phase begins, changes to 

the budget estimation submission are issued as Program Budget Decisions, 

the last of which is generally issued 2 months before the President submits 

the budget to Congress in February. 

When submitting the budget requests to Congress, the services include 

justification submissions to summarize the process by which the budget 

request was derived. Typically, the justification submissions for family 

housing O&M accounts include a definition of what the account funds, a 

description of the prior fiscal year’s appropriation, and expected pricing 

and program changes to that account. The estimate for the budget year is 

then developed based on those changes. In addition, the justification 

submissions provide a brief statement about pricing and program changes. 

During the budget execution year, reprogrammings may be necessary if 

obligations for each account and subaccount do not match the initial 

funding amount as specified in the conference report. Historically, the 

services have reprogrammed family housing O&M funds to pay for 

unexpected events such as natural disasters, utility rate increases, and 

foreign currency differences. Delays in housing privatization have also 

caused some of the services to reprogram funds to pay for expenses 

associated with housing units they had expected to privatize, according to 

service officials. Also, OSD and the services consider all family housing 

O&M accounts, except maintenance, as “must-pay” accounts, meaning that 

such programs and activities funded in these accounts must be paid even if 

the obligations differ from the initial funding amount. 

According to DOD’s Financial Management Regulation, the services are 

required to notify Congress of any reprogramming of family housing O&M 

funds that are 10 percent or more of the initial funding level.10 The 

conference report accompanying the 2004 Military Construction 

Appropriations Act further states that the services are to notify Congress 

when reprogrammings reach 10 percent in the family housing O&M 

accounts and subaccounts. 

 10 DOD Financial Management Regulation 7000-14R, Volume 3, Chapter 7. 

Reprogrammings of Family 

Housing O&M Funds 
Page 9 GAO-04-583 Military Housing 

Congress authorized DOD to establish the Military Housing Privatization 

Initiative,11 to use private sector investment capital and housing 

construction expertise to finance, own, operate, and maintain military 

housing in an effort to help eliminate inadequate housing from DOD’s 

inventory. In 2002, OSD accelerated the goal of eliminating inadequate 

military family housing from fiscal year 2010 to 2007, which has impacted 

the services’ ability to budget for family housing O&M. As the services 

privatize their housing, reductions in their housing inventory will occur. As 

such, funding levels for the family housing O&M accounts and 

subaccounts are affected differently by privatization (see app. I, slide 15). 

Some accounts are more directly related to the inventory of militaryowned housing and will therefore be expected to decrease generally in 

proportion to the decrease in inventory due to privatization. These 

accounts include costs for utilities, furnishings, and services (e.g., trash 

removal, snow clearing, and fire and police protection). Other accounts, 

such as leasing, are based on specific anticipated requirements 

independent from the housing inventory and pace of privatization. Some 

accounts, primarily the management subaccount and maintenance of real 

property account, are partially influenced by privatization-related factors. 

The management subaccount, for example, covers mostly salary costs for 

activities such as housing referrals, waiting lists, tenant and landlord 

complaints, and basic housing allowance surveys in addition to the 

administrative costs directly related to managing military-owned housing. 

As a result, many of these costs remain regardless of privatization since 

they are not related to the housing inventory. 

Budget justification materials submitted to Congress for family housing 

O&M funding do not clearly and consistently explain how the housing 

privatization program impacts the services’ budget requests. The services 

use similar assumptions and methods to develop budget requests for 

family housing O&M, but they often rely on assumptions established up to 

a year and a half before the budgets are executed. While the services have 

the ability to revise and update their budget requests, they typically choose 

not to because of the difficulty of doing so when faced, in part, with other 

competing defense priorities, and the relatively small size of the family 

housing O&M budget. Furthermore, changes in the pace of expected 

privatization can affect funding required for individual accounts and 

 11 The National Defense Authorization Act for Fiscal Year 1996 (Pub. L. No. 104-106), Feb. 

10, 1996. 

Housing Privatization 

Affects the Family Housing 

O&M Budgets 

Services Do Not 

Clearly and 

Consistently Explain 

the Impact of 

Privatization in Their 

Budget Justifications 

to Congress 
Page 10 GAO-04-583 Military Housing 

subaccounts, although not uniformly, but the impact of privatization is not 

well explained in the services’ budget justifications. 

The services use similar pricing and program assumptions and methods to 

develop their family housing O&M budget requests and base their budget 

requests largely on historical obligations adjusted for assumptions about 

pricing (e.g., inflation, foreign currency rates, and pay adjustments) and 

the housing program (e.g., expected reductions in inventory due to 

housing privatization). For example, when the services are developing the 

budget requests for the utilities account, they typically look at prior year 

costs per unit and adjust the costs for anticipated inflation and expected 

changes in housing unit inventory. Further, many of the pricing and 

program assumptions for family housing O&M are established up to a year 

and a half before the budget is executed. For example, service officials 

told us that the fiscal year 2004 budget requests were largely determined 

when the services’ Program Objectives Memorandums were completed in 

May 2002. Similarly, many of the assumptions, such as the privatization 

rate, used in preparing the fiscal year 2004 budget request were largely 

based on the services’ 2002 family housing master plans. Once these 

assumptions are established, service officials told us that the budget 

requests are less likely to be changed, even if newer information becomes 

available. While the services have the ability to revise and update their 

budget requests, service officials told us they typically do not revise the 

requests because competing defense priorities and the relatively small size 

of the family housing O&M budget request make revisions difficult. For 

example, if a service anticipates a slippage in privatization after the family 

housing O&M budget request is programmed, officials said that revising 

the request becomes more complicated because previous assumptions 

have already been reflected in funding shifts to the military personnel 

appropriation budget request to pay for the expected increase in the 

housing allowance for those servicemembers intended to be in privatized 

housing. Rather, service officials said that they are more likely to make the 

needed funding adjustments for family housing O&M during budget 

execution through reprogrammings. 

Services Often Rely on 

Assumptions Established 

up to a Year and a Half 

Before Budget Execution 
Page 11 GAO-04-583 Military Housing 

The services’ budget justification submissions to Congress are unclear and 

inconsistent in explaining the impact of privatization on the family housing 

O&M budget requests. More specifically, the submissions are not clear in 

explaining how housing inventory reductions due to privatization affect 

each of the nine family housing O&M accounts and subaccounts or the 

extent to which a previously established privatization schedule is on track 

or slipping. Service officials told us that slippage in the privatization 

schedule can cause an increase in the cost for some accounts, such as the 

utilities and maintenance of real property accounts that primarily are 

influenced by the number of housing units still in DOD’s housing inventory 

and not yet privatized. While some decreases in family housing O&M 

requests were credited to inventory reductions in military-owned housing, 

the justification submissions accompanying the requests did not fully 

explain how privatization led to those decreased requests. For example: 

• The Navy indicated a decrease in funds for most of the family housing 

O&M accounts and subaccounts because of privatization in fiscal year 

2004, but it provided no additional information explaining how 

privatization affected the request for each account. 

• The Army indicated a decrease in funds for the management 

subaccount because of privatization in fiscal year 2004, but it did not 

explain what management activities the Army adjusted due to 

privatization. 

In addition, the services did not consistently address the impact of 

privatization for each of the family housing accounts and subaccounts 

within a fiscal year, nor did they consistently address the impact of 

privatization on a specific account from fiscal year to fiscal year. For 

example: 

• The Army indicated decreases in funds for most of the family housing 

O&M accounts because of privatization in fiscal year 2003, but it did 

not decrease funding in the management subaccount for privatization, 

as would be expected. In contrast, the Army did indicate decreases in 

funds for the management subaccount in fiscal years 2002 and 2004 due 

to privatization. 

• The Air Force indicated decreases in funds for inventory reductions 

due to privatization in its management subaccount request in fiscal 

years 2002 and 2003. In contrast, in fiscal year 2004, the Air Force’s 

budget request for the same subaccount had no discussion of the 

impact of privatization. Nor did the request include a reduction in the 

Services Are Unclear and 

Inconsistent in Explaining 

the Impact of Privatization 

in Their Budget 

Justifications to Congress 
Page 12 GAO-04-583 Military Housing 

funding for the management subaccount in fiscal year 2004, as would 

be expected. 

Although the services’ budget justification submissions to Congress are 

unclear in explaining the impact that housing privatization is having on the 

family housing O&M budget at the time the budget is prepared, all the 

services have information that could help clarify how privatization affects 

the family housing O&M accounts and subaccounts. For example, Army 

officials recognized that clear information explaining the impact of 

privatization is not always presented to Congress and, consequently, 

added additional information explaining privatization impacts in its fiscal 

year 2005 family housing O&M budget justification submission. Also, the 

Army and the Navy are currently conducting studies to better determine 

the impact of housing privatization on their management costs. OSD 

officials said that more experience with housing privatization is needed to 

properly assess its impact on funding levels for the management 

subaccount. The dynamics of trying to maintain government-owned 

housing while increasingly moving to privatization means that early 

assumptions about when privatization will actually occur for individual 

projects can change over time and require changes in funding for selected 

accounts and subaccounts. 

Congress has limited visibility of the services’ reprogramming of family 

housing O&M funds. Although the services are required to notify Congress 

of reprogrammings to an account or subaccount by 10 percent or more, 

notification of reprogrammings by less than 10 percent or a decrease in 

funds to an account is not required. However, appropriations such as the 

regular O&M do provide such information. Compared with the other 

services, reporting for the Navy and the Marine Corps provides even less 

visibility over their reprogramming actions because reprogrammings for 

the four operations subaccounts were not reported to Congress. In 

addition, their data reflecting reprogramming actions throughout the year 

do not always match comparable official obligation data produced by the 

Defense Finance and Accounting Service. 

Current requirements provide congressional decision makers with limited 

visibility of the services’ reprogrammings between the nine family housing 

O&M accounts and subaccounts. The services are required to report to 

Congress reprogrammings that are 10 percent or more to an account or 

subaccount. However, Congress is not notified when reprogrammings are 

below 10 percent or result in a funding decrease. Other required 

Congress Has Limited 

Visibility Over the 

Reprogramming of 

Family Housing O&M 

Funds 

Current Requirements on 

Reprogrammings Provide 

Congress with Limited 

Visibility 
Page 13 GAO-04-583 Military Housing 

appropriations reporting, such as regular O&M, provides congressional 

decision makers with more information. 

Current reporting requirements do not provide Congress with complete 

visibility of the services’ reprogrammings between the family housing 

O&M nine accounts and subaccounts. First, the services are not required 

to inform Congress of reprogrammings below 10 percent. Due to the 

varying sizes of the accounts within family housing O&M, a belowthreshold reprogramming in a large account such as maintenance can be 

significant when compared to smaller accounts or subaccounts. On the 

other hand, smaller valued accounts may generate many more 

reprogramming actions because of their smaller funding base. As shown in 

table 1, in fiscal year 2003, the Army reprogrammed 4.7 percent 

($22.6 million) to the maintenance account. Although the amount 

reprogrammed into the maintenance account was below 10 percent, this 

amount represented 54.4 percent of the services subaccount. In another 

example, the Air Force was not required to notify Congress of a 

$3.7 million increase in the leasing account because it was below 10 

percent in fiscal year 2003. Second, the services are not required to notify 

Congress of decreases to an account. Between fiscal year 2001 and 2003, 

there were 14 instances involving decreases of 10 percent or more from an 

account. As shown in table 1 for example, the Air Force reprogrammed 

14.9 percent ($75 million) in fiscal year 2003 from the maintenance 

account to fund expenses in other accounts. 
Page 14 GAO-04-583 Military Housing 

Table 1: Services’ Reprogramming Amounts and Percentages Reprogrammed, Fiscal Year 2003 

Dollars in thousands 

Army Navy and Marine Corps Air Force 

Account 

Dollar 

amount change 

Percent 

change

Dollar 

amount change

Percent 

change 

Dollar 

amount change

Percent 

change

Operations 

 Management -$7,103 -8.0 $16,063 19.7 $19,434 40.4

 Services 3,083 7.4 7,276 11.7 5,380 21.5

 Furnishings -3,857 -8.0 -8,059 -26.7 2,155 6.1

 Miscellaneous -118 -9.0 -196 -21.6 441 29.4

Utilities -11,246 -5.3 8,602 5.0 28,029 21.2

Maintenance 22,605 4.7 -9,926 -2.7 -75,000 -14.9

Privatization 5,000 24.2 3,087 27.3 9,200 60.0

Leasing -19,718 -9.2 0 0.0 3,773 3.7

Mortgage insurance 

premium 0 0.0 0 0.0 0 0.0

Source: GAO’s analysis of service appropriation and obligation information. 

Note: A negative number means the services reprogrammed funds out of the account or subaccount. 

In other appropriations, DOD provides congressional decision makers 

with more information on reprogrammings than in family housing O&M. 

For example, the services are required to submit a Report of Programs to 

Congress twice a fiscal year for regular O&M.12 The report provides 

information tracking the movement of funds from initial appropriation 

through final obligation, including supplementals, rescissions, transfers, 

and reprogrammings. For the family housing O&M appropriation, DOD is 

not required to provide such a report, thus limiting congressional visibility 

over all reprogrammings. Service officials told us that such information is 

already tracked at the headquarters level and could be provided to 

Congress. 

 12 DOD Financial Management Regulation 7000-14R, Volume 3, Chapter 6. 
Page 15 GAO-04-583 Military Housing 

When compared to the other services, reporting on the Navy and the 

Marine Corps’ family housing O&M reprogrammings provides less 

visibility. The reporting of the Navy and the Marine Corps’ family housing 

O&M funds does not always separate the operations account into the four 

subaccounts. In addition, the Navy and Marine Corps obligation data 

reflecting reprogramming actions during a fiscal year do not always match 

comparable official obligation data produced by the Defense Finance and 

Accounting Service. 

The reporting of the Navy and the Marine Corps’ family housing O&M 

funds does not always separate the operations account into the four 

subaccounts. While the other services notified Congress of 

reprogrammings that were 10 percent or more for the subaccounts within 

operations, until fiscal year 2004, the Navy and the Marine Corps 

combined the four subaccounts into the operations account when 

reporting reprogrammings. For example, in fiscal year 2003, the 

management and services subaccounts increased by 19.7 percent 

($16.1 million) and 11.7 percent ($7.3 million), respectively. Even though 

the reprogrammings exceeded the 10 percent threshold, no notification 

was sent to Congress because when these reprogrammings were 

combined with the other subaccounts, overall reprogrammings in the 

operations account did not exceed 10 percent. Navy budget officials said 

that with their fiscal year 2004 notifications to Congress, the Navy and the 

Marine Corps will be reporting reprogrammings for each subaccount 

individually, similar to the practices of the other services. In addition, the 

Defense Finance and Accounting Service does not report obligations for 

the four subaccounts individually for the Navy and the Marine Corps, as it 

does for the other services. 

Unlike the other services, Navy and the Marine Corps obligation data 

reflecting reprogramming actions during a fiscal year do not always match 

comparable obligation data produced by the Defense Finance and 

Accounting Service. For example, in fiscal year 2002, the Defense Finance 

and Accounting Service reported obligations for the Navy and Marine 

Corps’ maintenance account as $391.1 million. However, the Navy and the 

Marine Corps reported fiscal year 2002 obligations of $368.5 million for 

maintenance in their justification submission to Congress. According to 

Navy and OSD officials, examples like this are part of long-standing 

problems with ensuring the consistency of data between Navy, Marine 

Corps, and Defense Finance and Accounting Service data systems. 

However, because Defense Finance and Accounting Service obligation 

data are considered official, OSD officials use that data when evaluating 

the budgets for the family housing O&M program. Service officials told us 

Navy and Marine Corps’ 

Reporting Provides Even 

Less Visibility Over 

Reprogrammings 
Page 16 GAO-04-583 Military Housing 

they are working with the Defense Finance and Accounting Service to 

address these issues. 

The services’ budget justification submissions to Congress have not 

always been clear in explaining funding requirements and the impacts of 

the privatization initiative on the budget requests for each of the nine 

family housing O&M accounts and subaccounts. Although the family 

housing O&M budget requests are expected to decrease due to reductions 

in housing inventory as the services privatize more housing, a continued 

lack of clarity in explaining the impacts of privatization will not allow 

Congress to determine the appropriateness of any decreases. Until the 

services provide Congress with sufficient data in their budget justification 

submissions explaining the impact of privatization, the services will 

continue to hinder the ability of Congress to conduct its oversight 

responsibilities. This also places the services at risk of having Congress 

reduce their budgets, as was the case with their fiscal year 2004 

appropriations for family housing O&M. 

Reprogramming notifications provide Congress some visibility over the 

movement of funds; however, complete information on all movement of 

funds is not required to be provided to Congress for the family housing 

O&M appropriation. In contrast, DOD is required to provide Congress with 

more information on the movement of funds for other defense 

appropriations, such as regular O&M. Until DOD provides Congress 

similar information on the reprogramming of family housing O&M funds, 

Congress will continue to receive an incomplete picture over the total 

movement of family housing O&M funds. Lacking such aggregate 

information on all fund movements could also limit Congress’ ability to 

fully conduct oversight of family housing O&M programs and activities. In 

addition, the Navy and the Marine Corps provide even less visibility of 

reprogrammings of family housing O&M funds because they do not report 

obligations for the four operations subaccounts and, prior to fiscal year 

2004, did not notify Congress of reprogrammings for these subaccounts. 

Therefore, congressional and DOD decision makers are not getting the 

same level of detail with regard to obligations for the four subaccounts as 

they do for the other services. Also, the Navy and the Marine Corps’ family 

housing O&M obligation data have been inconsistent with the comparable 

data produced by the Defense Finance and Accounting Service. Until the 

Navy and the Marine Corps report obligation data using the same structure 

that congressional conferees use to designate funds for the four operations 

subaccounts and resolve data inconsistencies between them and the 

Defense Finance and Accounting Service, DOD and congressional decision 

Conclusions 
Page 17 GAO-04-583 Military Housing 

makers will continue to lack sufficient budget visibility, hindering their 

ability to evaluate Navy and Marine Corps budget requests with the same 

degree of confidence and detail as those of the other services. 

To provide Congress with sufficient data in the services’ budget 

justification submissions, we recommend that the Secretary of Defense 

direct the Under Secretary of Defense (Comptroller) to work with the 

services to better explain the impacts of the housing privatization initiative 

on the budget requests for each of the nine family housing O&M accounts 

and subaccounts. 

To improve visibility over the Navy and the Marine Corps’ reprogrammings 

of family housing O&M funds, we recommend that the Secretary of 

Defense direct the Secretary of the Navy to work with the Defense Finance 

and Accounting Service to take the following two actions: 

• Report obligation data using the same budget structure that 

congressional conferees use to designate how funds are to be used for 

the four operations subaccounts, similar to reporting done by the other 

military services. 

• Resolve long-standing data inconsistencies to ensure that obligation 

data reported by the Defense Finance and Accounting Service match 

obligation data reported by the Navy and the Marine Corps. 

To improve visibility over reprogrammings of family housing O&M funds 

by all services, Congress may wish to consider requiring the Secretary of 

Defense to provide it information covering the movement of funds for the 

family housing O&M appropriations in a report at the end of the fiscal 

year, similar to what DOD now provides to Congress on other DOD 

appropriations. This report should provide timely and accurate 

information on movement of funds, which includes reprogrammings 

within the nine family housing O&M accounts and subaccounts, along with 

other information on other fund movements such as transfers and 

supplementals. 

In written comments on a draft of this report, the Deputy Comptroller 

(Program/Budget) within the Office of the Under Secretary of Defense 

(Comptroller) agreed with our recommendations stating that the 

department is taking steps to implement them. In reference to our 

recommendation that the services better explain the data provided to 

Recommendations for 

Executive Action 

Matter for 

Congressional 

Consideration 

Agency Comments 
Page 18 GAO-04-583 Military Housing 

Congress regarding the impact of privatization on family housing O&M 

budget requests, the department has already drafted changes to its 

financial management regulation and expects to issue an update to these 

regulations within the next 90 days. In reference to our two 

recommendations to improve congressional visibility of Navy and Marine 

Corps’ reprogrammings of family housing O&M accounts and subaccounts 

and to improve the consistency of Navy and Marine Corps obligation data, 

DOD plans to provide written direction to the Secretary of the Navy and 

the Defense Finance and Accounting Service within 30 days after the 

release of our report to address these two recommendations. 

In addition, the Deputy Comptroller (Program/Budget) within the Office of 

the Under Secretary of Defense (Comptroller) responded favorably to our 

matter for congressional consideration suggesting that Congress may wish 

to consider further improving the visibility of the services’ 

reprogrammings by requiring DOD to provide information covering the net 

movement of funds for each of the nine family housing O&M accounts and 

subaccounts. DOD’s comments, which are included in this report in 

appendix III, also discusses the types of information DOD would provide 

to Congress covering the net movement of funds for the family housing 

O&M accounts and subaccounts. 

To assess the services’ assumptions and methods used to develop 

individual budget requests and how well their budget justifications explain 

the impact of privatization on family housing O&M funds, we reviewed and 

analyzed the services’ budget justification submissions covering fiscal 

years 2002 through 2004. We evaluated how these justifications 

incorporated the services’ privatization schedule and the resulting 

explanation in the budget requests. In addition, we interviewed Army, 

Navy, Marine Corps, and Air Force family housing officials to obtain 

information on the assumptions and methods used to develop the family 

housing O&M budget requests. We identified statements in the services’ 

budget justification submissions to assess how well the services explained 

their assumptions, methodology, and the impact of privatization. 

To assess the extent to which Congress has visibility over the services’ 

reprogramming of family housing O&M funds, we compared the services’ 

initial funding levels with year-end obligations for the nine family housing 

O&M accounts and subaccounts to determine the amount reprogrammed 

by the services during fiscal years 2001 through 2003. To review the 

reprogramming of funds between the family housing O&M accounts, 

including amounts over and under established reprogramming thresholds, 

Scope and 

Methodology 
Page 19 GAO-04-583 Military Housing 

we analyzed the services’ and the Defense Finance and Accounting 

Service’s budget data for the family housing O&M account. In addition, we 

compared these reprogrammings with the congressionally mandated 

requirements for the services to report reprogrammings to Congress and 

the execution data in the services’ justification submissions to the Defense 

Finance and Accounting Service’s reports to ensure that the information 

was consistent. For the Army and the Air Force, we found that the 

obligation amounts reported matched those reported by the Defense 

Finance and Accounting Service. Based on our comparisons and speaking 

with Army and Air Force officials, we were satisfied with the information. 

Consequently, we determined the use of Army and Air Force justification 

materials and Defense Finance and Accounting Service reports was 

sufficiently reliable for meeting our objectives. For the Navy and Marine 

Corps, we found inconsistencies between the services’ justification 

submission and the Defense Finance and Accounting Service’s reports. 

We discussed the results of our work with officials from the Office of the 

Under Secretary of Defense (Comptroller); the Housing and Competitive 

Sourcing Office within the Office of the Under Secretary of Defense for 

Acquisition, Technology, and Logistics; the Defense Finance and 

Accounting Service; and the military services. We have designated DOD’s 

financial management area—including funding and cost data—as high risk 

due to long-standing deficiencies in DOD’s systems, processes, and 

internal controls.13 However, as discussed, we determined the data we 

used during our review of the services’ reprogramming of family housing 

O&M funds were sufficiently reliable for this report. 

We are sending copies of this report to the Secretaries of Defense, the 

Army, the Navy, and the Air Force; the Commandant of the Marine Corps; 

and the Director; Office of Management and Budget. We will also make 

copies available to others upon request. In addition, the report is available 

at no charge on GAO’s Web site at www.gao.gov. 

 13 U.S. General Accounting Office, Major Management Challenges and Program Risks: 

Department of Defense, GAO-03-98 (Washington, D.C.: January 2003) and U.S. General 

Accounting Office, High-Risk Series: An Update, GAO-03-119 (Washington, D.C.: January 

2003). 
Page 20 GAO-04-583 Military Housing 

Please contact me on (202) 512-8412, or my Assistant Director, Mark Little, 

at (202) 512-4673 if you or your staff have any questions regarding this 

report. Major contributors to this report were Laura Talbott, James 

Reynolds, Daniel Chen, and Jane Hunt. 

Barry W. Holman, Director 

Defense Capabilities and Management 
Page 21 GAO-04-583 Military Housing 

Congressional Committees 

The Honorable John W. Warner 

Chairman 

The Honorable Carl Levin 

Ranking Minority Member 

Committee on Armed Services 

United States Senate 

The Honorable Kay Bailey Hutchison 

Chairman 

The Honorable Dianne Feinstein 

Ranking Minority Member 

Subcommittee on Military Construction 

Committee on Appropriations 

United States Senate 

The Honorable Duncan Hunter 

Chairman 

The Honorable Ike Skelton 

Ranking Minority Member 

Committee on Armed Services 

House of Representatives 

The Honorable Joe Knollenberg 

Chairman 

The Honorable Chet Edwards 

Ranking Minority Member 

Subcommittee on Military Construction 

Committee on Appropriations 

House of Representatives 
Appendix I: GAO Briefing Slides 

Page 22 GAO-04-583 Military Housing 

Appendix I: GAO Briefing Slides 

Briefing

DOD’s Military Family Housing 

Operation and Maintenance Budget 
Appendix I: GAO Briefing Slides 

Page 23 GAO-04-583 Military Housing 

2

Objectives: Engagement Stems from Congressional Mandate

• In the conference report accompanying the fiscal year 2004 Military 

Construction Appropriations Act, Congress expressed its concerns

about the family housing operation and maintenance (O&M) budget:

• Congress concerned that the assumptions and methods underlying 

the budget request for family housing O&M accounts are not 

adequately explained by the services.

• Congress concerned about movement of funds between the various 

family housing O&M subaccounts.

• Congress directed us to

• conduct a study on the assumptions and methods underlying the 

services’ budget requests for the family housing O&M budget and 

• review the movement of funds between the family housing O&M 

budget accounts and subaccounts.
Appendix I: GAO Briefing Slides 

Page 24 GAO-04-583 Military Housing 

3

Results in Brief

• Services’ budget requests are built on historical pricing and program assumptions. However, their budget justification materials do not provide a 

sufficient explanation of how the housing privatization program has affected 

budget requests for family housing O&M.

• Justification materials often rely on historic data and assumptions.

• Services use similar assumptions and methods to develop budgets, but 

approaches among the services differ that lead to inconsistencies. 

• Justification materials present an unclear and inconsistent picture in 

explaining the impact of inventory reductions from housing privatization 

on the services’ budget requests to Congress.

• As a result, unclear budget requests 

• hinder Congress’ ability to conduct oversight responsibilities and

• continue to place the services at risk of having their budgets reduced by 

Congress, as was the case with their fiscal year 2004 appropriations.
Appendix I: GAO Briefing Slides 

Page 25 GAO-04-583 Military Housing 

4

Results in Brief (con’t)

• Congress has limited visibility of the reprogramming of military family housing O&M funds.

• Congress is getting a partial picture with regard to the 

reprogramming of family housing O&M funds because (1) the 

services are not required to inform Congress of reprogrammings that 

decrease an account or a subaccount and (2) until last year, Navy 

did not notify Congress of specific reprogrammings in its four 

operations subaccounts.

• The services are not required to report to Congress all movement of 

funds for the family housing O&M appropriations, although such 

reporting is required for other DOD appropriations, such as in 

procurement.

• Without such reporting it could limit congressional oversight.
Appendix I: GAO Briefing Slides 

Page 26 GAO-04-583 Military Housing 

5

Results in Brief (con’t)

• Navy and Marine Corps provide even less visibility of activities

associated with operating their military family housing O&M program.

• Unlike the other services, Navy and Marine Corps do not report 

obligations for the four operations subaccounts and, prior to fiscal 

year 2004, did not notify Congress of their reprogramming actions 

for these subaccounts.

• Navy and Marine Corps family housing O&M obligation data does 

not always match comparable official obligation data produced by

Defense Finance and Accounting Service for the last several years.

• This lack of budget visibility and accountability hindered the ability of 

decisionmakers to evaluate Navy and Marine Corps budget requests

with the same degree of confidence and detail as those of the other 

services.
Appendix I: GAO Briefing Slides 

Page 27 GAO-04-583 Military Housing 

6

Fiscal Year 2004 Military Family Housing O&M Appropriation

Dollars in millions

Service Amount

Army $1,033.0

Navy and Marine Corps 835.1

Air Force 816.1

Total $2,684.2

Source: Military Construction Appropriations Act for Fiscal Year 2004.

Note: In addition, Congress appropriated $49.4 million for defensewide family housing O&M (defense-wide includes 

National Security Agency, Defense Logistics Agency, and Defense Intelligence Agency).

Background: Congress Appropriated about $2.7 Billion to the 

Services for Military Family Housing O&M for Fiscal Year 2004

Congress appropriates through the Military Construction Appropriations 

Act military family housing O&M funds to each service.
Appendix I: GAO Briefing Slides 

Page 28 GAO-04-583 Military Housing 

7

Source: GAO analysis of applicable conference reports.

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

FY

1995

FY

1996

FY

1997

FY

1998

FY

1999

FY

2000

FY

2001

FY

2002

FY

2003

FY

2004

Dollars in thousands

Army

Navy and Marine Corps

Air Force

Military Family Housing O&M Appropriations 

Fiscal Years 1995-2004 (constant fiscal year 2004 dollars)

Background: Military Family Housing O&M Appropriation for Each 

Service Has Decreased Slightly over the Last Decade
Appendix I: GAO Briefing Slides 

Page 29 GAO-04-583 Military Housing 

8

Fiscal Year 2004 Military Family Housing O&M Appropriations by Account and Subaccount

Note: May not add up to 100 percent due to rounding.

Background: Congress Designates Its Expected Use of Military Family 

Housing O&M Funds by Account and Subaccount
Appendix I: GAO Briefing Slides 

Page 30 GAO-04-583 Military Housing 

9

Must pay accounts must be paid, even if the amounts 

differ from the budget estimate.

Must pay accounts

• Management

• Services

• Furnishings

• Miscellaneous

• Utilities

• Leasing

• Privatization

• Mortgage Insurance Premium

Discretionary account

• Maintenance

Background: Maintenance Account Generally Has Spending 

Flexibility Because Maintenance Requirements Can Be Deferred
Appendix I: GAO Briefing Slides 

Page 31 GAO-04-583 Military Housing 

10

Assumptions and Methods: Services’ Budget Formulation Process 

Translates Strategy from Master Plans into Their Budget Requests

Family Housing Master

Plans

• Begins the family 

housing O&M budget 

process by outlining the 

assumptions in each 

service’s family housing 

master plans.

• Provides a consolidated 

strategy for planning, 

programming, and 

executing the family 

housing program.

• Includes housing 

privatization schedule 

and plans to eliminate 

inadequate housing.

President’s Budget

Request and

Justification Books

• Services request funds 

by family housing O&M 

appropriation accounts 

and subaccounts.

DOD Budget Documents

• DOD’s budget building 

process involves balancing 

defense priorities, fiscal 

constraints, and program 

requirements.

• Family housing 

requirements are matched 

to OSD’s planning and 

fiscal guidance.

• Fiscal and program 

assumptions are further 

refined as the services build 

their budget requests as 

contained in key defense 

budget documents like:

– Defense Planning Guidance

– Defense Fiscal Guidance

– Program Objectives Memorandum

– Program Decision Memorandum

– Budget Estimate Submission

– Program Budget Decisions

Conference Report

• Four family housing 

O&M appropriations.

• Conferees designate 

how funds are to be 

spent by the nine family 

housing O&M accounts 

and subaccounts.
Appendix I: GAO Briefing Slides 

Page 32 GAO-04-583 Military Housing 

11

2002 2003 2004

POM

• Feb. – Start briefing 

requirements.

• Mar. – DPG issued.

• Apr. – OSD issues 

fiscal guidance.

• May - POM budget 

targets set for fiscal 

years 2004-2009.

Requirements Budgeting

Justification

Congressional Process

BES/PBD

• DOD issues budget data call (includes 

inflation rates, etc.).

• June-Aug. – Build BES.

• Oct.-Dec. – OSD evaluates BES.

• Oct.-Dec. – OSD issues PBDs to finalize 

budget request.

PBR

• Build budget using 

POM/BES/PBD.

• Sept.-Dec. OMB and 

presidential decisions.

• Feb. – President 

submits budget to 

Congress.

Start of fiscal 

year 2004

• Family Housing 

Master Plans 

• 2001 execution 

data

• 2002 

appropriation 

data

• FY 2002 

execution data

• FY 2003 

appropriation 

data

According to officials, in 

many ways the family 

housing O&M budget 

accounts were determined 

over 11⁄2 years before 

budget execution.

Legend

BES – Budget Estimate Submission

DPG – Defense Planning Guidance

OMB – Office of Management and Budget

PBD – Program Budget Decision

PBR – President's Budget Request

PDM – Program Decision Memorandum

POM – Program Objectives Memorandum

Assumptions and Methods: Timeline for Fiscal Year 2004 Military 

Family Housing O&M Budget Request
Appendix I: GAO Briefing Slides 

Page 33 GAO-04-583 Military Housing 

12

• Army emphasizes fully funding its must pay accounts to 

minimize reprogrammings from its maintenance account 

and prevent maintenance disruptions during budget 

execution year.

• Navy and Air Force said that to cover dollar shortfalls for 

must pay accounts, they would reprogram funds from the 

maintenance account during budget execution year.

• All services have different housing privatization rates that 

affect their budget estimates:

• OSD expects to privatize over 60 percent of its military 

family housing inventory by the end of fiscal year 2007.

Assumptions and Methods: Services Use Similar Assumptions and Methods 

to Develop Their Budget Request but Differ in Overall Approach
Appendix I: GAO Briefing Slides 

Page 34 GAO-04-583 Military Housing 

13

• Key pricing assumptions—OSD provides input for

• inflation factors,

• foreign currency rates,

• pay adjustments, and 

• reductions through energy conservation initiatives. 

• Key program assumptions—OSD and services provide input for 

anticipated pace of housing privatization: 

• Projects are being privatized at different pace by service.

• Inventory of family housing units decreasing at different amounts by service.

• When assumptions used to build the budget request are not fully 

realized, reprogrammings are needed to adjust to reality during the 

budget year.

Assumptions and Methods: Budget Request Based Largely on 

Historical Costs Adjusted for Pricing and Program Assumptions
Appendix I: GAO Briefing Slides 

Page 35 GAO-04-583 Military Housing 

14

Assumptions and Methods: Services Use Similar Methods to Develop 

Budget Requests for the Various Nine Accounts and Subaccounts

Account/subaccount

Operations

Management 

Services

Furnishings 

Miscellaneous 

Utilities

Maintenance of Real Property

Leasing 

Mortgage Insurance Premium

Privatization Support 

Typical method to develop budget request 

Anticipated costs for mostly salaries and special studies

Unit cost average multiplied by inventory average

Unit cost average multiplied by inventory average

Specified anticipated costs for overseas housing and other reimbursements

Unit cost average multiplied by inventory average

Unit cost average multiplied by inventory average 

Specified anticipated costs per leased unit in the United States and overseas

Specified anticipated costs

Specified anticipated costs for consultants and other privatization expenses
Appendix I: GAO Briefing Slides 

Page 36 GAO-04-583 Military Housing 

15

Assumptions and Methods: Not All Military Family Housing O&M 

Accounts Decrease Proportionally to the Decrease in Inventory

a Excludes furnishings for foreign locations.

b Although the military family housing inventory has been decreasing, service officials told us their maintenance 

accounts have not decreased proportionally—mostly in order to address unfunded maintenance backlogs.

Account/subaccount

Operations

Management 

Services

Furnishings 

Miscellaneous 

Utilities

Maintenance of Real Property

Leasing 

Mortgage Insurance Premium

Privatization Support 

8

5

4 

<1

17

44

19 

<1

3

Percent of 2004 

appropriation

Proportionally related to 

reduced housing inventory

Not proportionally related to 

reduced housing inventory

9

9

9

9

9

9

9

9

9

b

a
Appendix I: GAO Briefing Slides 

Page 37 GAO-04-583 Military Housing 

16

Assumptions and Methods: Many Considerations Go into the 

Services’ Justification Materials to Support Their Budget Requests

• As the services translate family housing master plans into requests for appropriations, the budget materials provided to Congress often rely on 

pricing and program assumptions made up to a year and a half before 

services execute their budgets.

• Acceleration of services’ housing privatization plans is having a 

significant influence on estimating budget needs, (e.g., OSD moved up 

its goal of eliminating inadequate military family housing from fiscal year 

2010 to 2007).

• Budget adjustments due to privatization schedule slippages could take 2 

to 3 years to be remedied.

• Services often use maintenance accounts to move funds with the 

least disruption because maintenance can be deferred.

• Any of these considerations can complicate the budget execution 

process if they are not estimated accurately. 
Appendix I: GAO Briefing Slides 

Page 38 GAO-04-583 Military Housing 

17

• Justification materials are unclear as to how the services’ privatization 

schedules affect O&M accounts and subaccounts:

• Justification materials do not fully explain the impact of privatization on 

family housing O&M budget, particularly for management activities.

• Material contains many inconsistencies when the budget data are 

analyzed from year to year for the same service or are analyzed for the 

same account across the services for the same year (e.g., showing how 

inventory reductions decreased the budget estimates one year, then 

showing no budget reductions the next year although inventory reductions 

occurred).

• Justification materials summarize the assumptions and methods used to 

develop the budget request:

• Services have additional information that could help clarify the request.

• For example, the Army added additional budget justification information in 

its fiscal year 2005 budget request to better explain privatization impacts.

Assumptions and Methods: Justification Materials Lack Clarity as to 

How Privatization Affects the Family Housing O&M Budget Request
Appendix I: GAO Briefing Slides 

Page 39 GAO-04-583 Military Housing 

18

• Some costs for managing housing activities will remain regardless of 

privatization:

• Housing management covers mostly salary costs for activities such 

as housing referrals, waiting lists, waivers for rental and utility 

deposits, tenant and landlord complaints, and basic housing 

allowance surveys.

• Army and Navy are currently conducting studies to better determine 

impact of housing privatization on their management costs (e.g.,

whether some of these activities could be contracted out or conducted 

by the housing privatization developer).

• OSD housing officials said more experience with housing privatization 

is needed to properly assess its impact on housing management 

activities.

Assumptions and Methods: Services Remain Uncertain as to How 

Housing Privatization Will Affect Housing Management Costs
Appendix I: GAO Briefing Slides 

Page 40 GAO-04-583 Military Housing 

19

• DOD’s financial management regulations state that services are to 

• seek congressional approval prior to reprogramming funds for 

specified accounts (e.g., Housing Privatization Support Costs) and 

items reduced by Congress in appropriation and 

• notify Congress when reprogrammings cumulatively reach or 

exceed 10 percent of the adjusted appropriated amount.

• Reprogramming data generally reflect the sum of hundreds of 

small actions.

• DOD’s financial management regulations do not allow the services to 

transfer funds between appropriations without OSD’s involvement (i.e., 

foreign currency):

• No evidence that unauthorized transfers were made.

Reprogramming of Funds: Services Reprogram Military Family 

Housing O&M Funds under Certain Controls
Appendix I: GAO Briefing Slides 

Page 41 GAO-04-583 Military Housing 

20

• Under current controls, congressional notification is not required when

• an account is increased by less than 10 percent or

• an account is reduced by any amount.

• Services are not required to report to Congress the aggregate movement of 

military family housing O&M funds as they are for other accounts, such as 

procurement and regular O&M. This report is called a Report of Programs.

• Navy and Marine Corps provide even less information:

• Unlike the other services, Navy and Marine Corps do not report obligations 

for the four operations subaccounts and, prior to fiscal year 2004 did not 

notify Congress of their reprogramming actions for these subaccounts.

• Navy and Marine Corps family housing O&M obligation data does not 

always match comparable official obligation data produced by Defense 

Finance and Accounting Service for the last several years. 

Reprogramming of Funds: Congress Has Limited Visibility over the 

Reprogramming of Family Housing O&M Funds
Appendix I: GAO Briefing Slides 

Page 42 GAO-04-583 Military Housing 

21

• We found 33 examples where the military family housing O&M accounts 

had changed by more than 10 percent from fiscal years 2001 to 2003: 

• 19 showed fund increases of 10 percent or more, of which the 

services were required to notify Congress.

• 14 showed fund decreases of 10 percent or more, of which the 

services were not required to notify Congress.

• Many reasons for reprogramming funds such as

• fact-of-life changes (e.g., foreign currency, utility rates, and natural

disasters) and

• a lot of flux in the housing privatization program (e.g., the recent 

acceleration of the pace of privatization and housing privatization 

schedule slippages).

• Smaller accounts are more likely to have larger percentage changes.

Reprogramming of Funds: No Distinct Pattern or Trend in 

Reprogramming Funds among the Family Housing O&M Accounts 
Appendix I: GAO Briefing Slides 

Page 43 GAO-04-583 Military Housing 

22

Reprogramming as a Percentage of Military Family Housing Operation and Maintenance Adjusted 

Appropriation by Account and Subaccount

Dollars in thousands

Account/subaccount FY2001 FY2002 FY2003

Operations

Managementsubaccount 

Services subaccount

Furnishings subaccount

Miscellaneous subaccount

($6,142)

($251)

($3,537)

$300

(7.34%)

(0.56%)

(7.97%)

35.09%

$1,530 

($4,612)

$1,360

($31)

1.88% 

(9.42%)

3.02%

(2.45%)

($7,103) 

$3,083

($3,857)

($118)

(8.02%) 

7.42%

(8.03%)

(8.99%)

Utilities $23,907 12.07% ($48,512) (19.80%) ($11,246) (5.33%)

Maintenance of Real 

Property $17,078 4.43% $62,060 14.06% $22,605 4.69%

Leasing ($15,916) (8.20%) ($15,314) (7.86%) ($19,718) (9.24%)

Mortgage Insurance 

Premium $0 0% $0 0% $0 0%

Housing Privatization 

Support Costs N/A N/A $0 0% $5,000 24.24%

Source: GAO analysis of the Defense Finance and Accounting Service’s budget execution 1002 reports and service justification budget material. 

Key: Shaded areas represent movements of funds greater than 10 percent of the adjusted appropriated amount.

Notes: N/A means not applicable.

Numbers in parentheses are negatives.

Reprogramming of Funds: Army
Appendix I: GAO Briefing Slides 

Page 44 GAO-04-583 Military Housing 

23

Reprogramming of Funds: Navy and Marine Corps

Reprogramming as a Percentage of Military Family Housing Operation and Maintenance Adjusted

Appropriation by Account and Subaccount

Dollars in thousands

Account/subaccount FY2002 FY2003

Operations

Management subaccount 

Services subaccount

Furnishings subaccount

Miscellaneous subaccount

$1,141

$2,594

($6,729)

1.34%

4.06%

(21.79%)

(57.55%)

$20,281

$7,092

($6,119)

($435)

23.98% 

10.90% 

(18.93%) 

(36.65%)

($8,059)

($196)

(26.74%)

(21.63%)

Utilities $37,066 22.46% $9,419 5.09% $8,602 4.97%

Maintenance of Real 

Property ($1,963) (0.50%) ($36,433) (9.00%) ($9,926) (2.65%)

Leasing ($23,467) (16.45%) ($7,529) (6.14%) $0 0.00%

Mortgage Insurance 

Premium ($69) (97.18%) ($2) (2.94%) $0 0.00%

Housing Privatization 

Support Costs N/A N/A $6,517 160.75% $3,087 27.3%

Source: GAO analysis of the Defense Finance and Accounting Service’s budget execution 1002 reports and service justification budget material. 

Key: Shaded areas represent movements of funds greater than 10 percent of the adjusted appropriated amount.

Notes: N/A means not applicable.

Numbers in parentheses are negatives.

FY2001

($713)

$16,063 19.70%

$7,276 11.71%
Appendix I: GAO Briefing Slides 

Page 45 GAO-04-583 Military Housing 

24

Reprogramming of Funds: Air Force

Reprogramming as a Percentage of Military Family Housing Operation and Maintenance Adjusted 

Appropriation by Account and Subaccount

Dollars in thousands

Account/subaccount FY2001 FY2002 FY2003

Operations

Management subaccount 

Services subaccount

Furnishings subaccount

Miscellaneous subaccount

$15,771 

$1,727 

($4,195) 

($710)

28.58% 

6.22% 

(11.07%) 

(30.67%)

$4,362 

$1,374

$551

($574)

7.58% 

4.90%

1.52%

(24.35%)

$19,434 

$5,380

$2,155

$441

40.37% 

21.52%

6.09%

29.38%

Utilities $19,712 12.49% $2,653 1.70% $28,029 21.23%

Maintenance of Real 

Property

($4,165) (0.98%) ($16,405) (3.80%) ($75,000) (14.92%)

Leasing ($11,945) (10.42%) $1,314 1.29% $3,773 3.66%

Mortgage Insurance 

Premium

$0 0% $0 0% $0 0%

Housing Privatization 

Support Costs

N/A N/A $6,871 28.83% $9,200 59.97%

Source: GAO analysis of the Defense Finance and Accounting Service’s budget execution 1002 reports and service justification budget material. 

Key: Shaded areas represent movements of funds greater than 10 percent of the adjusted appropriated amount.

Notes: N/A means not applicable.

Numbers in parentheses are negatives.
Appendix II: Family Housing Operation and 

Maintenance Budget Definitions 

Page 46 GAO-04-583 Military Housing 

Department of Defense’s Financial Management Regulation1 defines the 

accounts and subaccounts that Congress uses to designate its 

understanding of funds within the family housing operation and 

maintenance appropriation as follows: 

Operations account. This is a summary account for consolidating costs 

accumulated in the following subordinate accounts: 

• Management account. Accumulates costs of management, 

administrative, and support type services at installation level 

involving (1) administration costs for installation housing offices 

including management office personnel, supplies, equipment, and 

utilities pertaining to the functions of a family housing office and 

costs for administrative support services provided in supply, 

comptroller, maintenance, and other installation offices when the 

costs for such services are attributable to family housing; (2) costs 

for housing referral administration pertaining to private housing, 

including rental guarantee projects and the provision of referral 

services, and assistance in locating and inspecting privately owned 

family housing for DOD personnel; (3) requirements surveys and 

preliminary family housing studies or engineering construction 

plans made before Secretary of Defense project approval, which 

also includes planning for improvement and rental guarantee 

projects and inspection of construction of rental guarantee housing; 

and (4) other identifiable management costs that directly support 

the family housing program. 

• Services account. Accumulates costs for authorized services such 

as (1) refuse collection and disposal—includes costs of family 

housing for collecting garbage, trash, ashes and debris, and for 

refuse disposal, such as the operation and maintenance of 

incinerators, sanitary fill, and regulated dumps. Also included are 

costs for acquisition, maintenance and repair of garbage and trash 

containers, and operation of can washing facilities; (2) fire 

protection—includes costs for protection and prevention of family 

housing facilities; (3) police protection—includes costs for law 

enforcement, traffic control, and protection of family housing 

facilities, (4) entomological services—includes costs of all control 

measures against fungi, insects, and rodents within family housing 

dwellings, facilities, and areas; (5) custodial services—includes 

 1

 DOD Financial Management Regulation 7000-14R, Volume 6, Chapter 9. 

Appendix II: Family Housing Operation and 

Maintenance Budget Definitions 
Appendix II: Family Housing Operation and 

Maintenance Budget Definitions 

Page 47 GAO-04-583 Military Housing 

costs of janitorial and custodial services performed in common 

service areas and the cost of elevator operation in family housing 

facilities; (6) snow removal—includes costs of removing, hauling, 

and disposal of snow, the cost of ice alleviation, and erection, 

maintenance, repairs and removal of snow fences for family housing 

areas; (7) street cleaning—includes costs of cleaning streets 

comprised of sweeping, flushing, and picking up litter; (8) municipal 

type services—includes costs of miscellaneous municipal type 

services not identifiable to other listed accounts; and (9) other 

services—includes costs of all other authorized services for family 

housing. 

• Furnishings account. Accumulates costs for initial acquisition, 

maintenance, repair, and replacement of furnishings, furniture, 

movable household equipment, and authorized miscellaneous items. 

Also includes control, handling, record keeping, moving of 

government-owned furnishings into and out of dwelling units and 

charges for connecting and disconnecting equipment, as well as 

handling costs incident to storage. 

• Miscellaneous account. Accumulates costs for (1) lease rents and 

permit payments for housing and trailer spaces leased by the 

government from private sources or provided by the Federal 

Housing Administration or the Department of Veterans Affairs as 

well as reimbursement costs for dwellings provided by state, 

municipal, or foreign governments or by other federal agencies, 

(2) German land taxes paid to the Federal Republic of Germany 

under the North Atlantic Treaty Organization Status of Forces 

Agreement for local taxes on land and improvements of family 

housing property, (3) fire insurance charges paid to the Federal 

Republic of Germany to cover fire damage to family housing 

dwelling units, (4) United Kingdom accommodation charges paid in 

accordance with the country-to-country agreement for housing 

provided to U.S. Forces, (5) other miscellaneous operations costs 

not covered elsewhere. 

Utility operations account. This is a summary account for accumulating 

costs for utilities consumed in family housing. This account excludes the 

costs of maintenance and repair of utility systems identified to the family 

housing property covered under the Maintenance of Real Property 

Facilities Account. Electricity, water, sewage, gas fuel oil or other heating 

fuels are the types of utilities reported in this account. 
Appendix II: Family Housing Operation and 

Maintenance Budget Definitions 

Page 48 GAO-04-583 Military Housing 

Maintenance of real property facilities account. This is a summary account 

for accumulating costs for the following: (1) Dwellings—costs of 

maintenance and repair of all family housing buildings as defined in DOD 

Instruction 4165.3 including all interior utilities and installed equipment 

(typically this involves (a) service calls for minor work including 

emergency and temporary repairs normally not in excess of 16 work 

hours, (b) routine maintenance for occupancy work and other 

maintenance usually scheduled annually or more frequently, (c) repairs 

and replacements for rehabilitations and replacement of major 

components and installed equipment, (d) interior and exterior painting 

and the necessary preparation, and (e) contract cleaning between 

occupancy, where authorized); (2) exterior utilities—costs of maintenance 

and repair of electric, gas, water, sewage and other utility distribution, 

collection, or service systems assigned to family housing (street and area 

lighting systems are included in exterior utilities beginning at a point 5 feet 

from the house line and ending at a point where the utility system joins a 

common use main or terminates); (3) other real property—costs for 

(a) maintenance, care, and repair of improved and unimproved grounds, 

storm sewerage, and drainage structures and costs of acquisition, 

maintenance, and repair of government-owned minor equipment, such as 

hand-operated lawn mowers used for grounds maintenance by occupants, 

(b) maintenance and repair of paved or stabilized streets, roads, walks, 

driveways, utility, service, and parking areas, as well as curbs, gutters, 

signs, and other road appurtenances, and (c) maintenance and repair of 

facilities other than dwellings, such as fences when the facility is 

dedicated to housing, athletic and recreation facilities, community 

buildings, and service facilities (also included are the costs of maintenance 

of trailer sites including outlets); and (4) alterations and additions—costs 

for incidental additions, expansions, extensions, and alterations to the 

existing real property (also includes the payments made to military 

personnel for telephone reconnection charges when maintenance or repair 

work necessitates government-directed nonpermanent change of station 

moves and charges resulting from improvement or repair projects funded 

in part from the family housing construction account). 

Leased housing account. This is a summary account for accumulating 

costs for the following: (1) lease cost—foreign account; costs for charges 

and other payments specified in the lease agreement for housing in foreign 

countries; (2) lease cost—foreign account government rental guarantee 

program; costs for charges and other payments specified in the lease 

agreement for housing in Europe under the Army’s foreign account 

government rental guarantee program; (3) lease cost—domestic account; 

costs for charges and other payments specified in the lease agreement for 
Appendix II: Family Housing Operation and 

Maintenance Budget Definitions 

Page 49 GAO-04-583 Military Housing 

housing in the United States including U.S. possessions and territories; 

(4) lease cost—section 801 account; costs for charges and other payments 

specified in the lease agreement for section 801-type housing; (5) other 

operation and maintenance cost—foreign account; costs for maintenance, 

utilities, and contracted services not provided by the lessor for housing in 

foreign countries (also includes initial make-ready costs, costs of 

government-owned furnishings, any pro rata share of the costs of 

installation services, and administrative costs such as assignment, travel, 

and inspection by installation personnel, and reimbursements to the 

Department of State for foreign affairs administrative support costs); 

(6) other operation and maintenance cost—foreign account government 

rental guarantee program; costs for maintenance, utilities, and contracted 

services not provided by the lessor for housing in foreign countries (also 

includes initial make-ready costs, costs of government-owned furnishings, 

any pro rata share of the costs of installation services, and administrative 

costs such as assignment, travel, and inspection by installation personnel, 

and reimbursements to the Department of State for foreign affairs 

administrative support costs); (7) other operation and maintenance 

cost—domestic account; costs for maintenance, utilities, and contracted 

services not provided by the lessor for housing in the United States (also 

includes initial make ready costs, costs of government-owned furnishings, 

any pro rata share of the costs of installation services, and administrative 

costs such as assignment, travel, and inspection by installation personnel); 

and (8) other operation and maintenance cost—Section 801 account; costs 

for maintenance, utilities, and contracted services not provided by the 

lessor for Section 801-type housing (also includes initial make ready costs, 

costs of government-owned furnishings, any pro rata share of the costs of 

installation services, and administrative costs such as assignment, travel, 

and inspection by installation personnel). 

Servicemen’s mortgage insurance premiums account. This is a summary 

account for accumulating the costs for servicemen’s mortgage insurance 

premium payments. 

Privatization support cost account.

2

 This account is for accumulating the 

costs that the government incurs in direct support of the family housing 

 2

 DOD has better defined costs for privatization support in response to a prior GAO 

recommendation (U.S. General Accounting Office, Military Housing: Better Reporting 

Needed of the Status of the Privatization Program and the Costs of Its Consultants, 

GAO-04-111 (Washington, D.C.: Oct. 9, 2003). At the time of this report, DOD’s definition of 

privatization support costs had not been incorporated into DOD’s Financial Management 

Regulation. 
Appendix II: Family Housing Operation and 

Maintenance Budget Definitions 

Page 50 GAO-04-583 Military Housing 

privatization program with the exception of those costs that will be 

included as part of the privatization project. These costs include all 

administrative, planning, development, solicitation, award, transition, 

construction oversight, and portfolio management activities associated 

with military housing privatization and specifically for: (1) site assessment 

costs which includes the costs in direct support of the family housing 

privatization program for environmental baseline assessments, 

environmental assessments, environmental impact statements, and any 

efforts required to be accomplished by the government prior to 

privatization for environmental mitigation, site surveys, or real estate 

costs; (2) project costs which includes all costs in direct support of the 

family housing privatization program for project feasibility studies, 

concept development, consultant fees, solicitation, procurement, 

contracting, execution, transition, construction management (supervision, 

inspection, and overhead), post award management and monitoring, and 

portfolio management, and (3) administrative costs which includes all 

costs in direct support of the family housing privatization program for 

civilian pay, travel, training, supplies, equipment, and for any services 

provided by a defense agency in support of the privatization program. 
Appendix III: Comments from the Department 

of Defense 

Page 51 GAO-04-583 Military Housing 

Appendix III: Comments from the 

Department of Defense 
Appendix III: Comments from the Department 

of Defense 

Page 52 GAO-04-583 Military Housing (350474) 
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